When to Foreign Qualify Your Business

When to Foreign Qualify Your Business

As your business grows, and you wish to do business outside your home state, you will need to know when to foreign qualify your business. This post discuss possible reasons to foreign qualify, and will help you understand when this process becomes necessary.

Foreign qualification is the process of registering your existing business or nonprofit in another state before you conduct business there. You begin this process by obtaining a Certificate of Authority to Transact Business from the state’s corporations division.

If you think you’re a foreign qualification expert, you can follow these tips and do it like the pros. For the others, you simply might not know whether you need to take this step. We’ve compiled the five biggest reasons your business might foreign qualify:

• You’ve started doing work in another state: This could mean a variety of activities. Check to see whether you must foreign qualify. If you’ve already begun, you could be looking at a penalty from the state.
• You’ve hired an employee in another state: Does the employee live in the state, have an address or work there? You might need to register in that state.
• You’ve acquired assets in another state: Has your business built an office, bought a warehouse, or obtained other assets outside state lines? You might need to foreign qualify.
• You’re applying for a job in another state: If you’re competing for a contract or work in another state, you might need to register with the state, and obtain appropriate licenses before winning the job. This is especially common among construction companies and general contractors.
• Your attorney tells you! If he says you need to foreign qualify for the above or other reasons, you better do it.

Once you’ve decided that you need to register your business in a new state, make sure to appoint a registered agent before you file for the Certificate of Authority. If you work in multiple states, using a national registered agent will save you time and money.

Foreign qualification is often only the first step. Many states require a business to file state tax registration and for additional licenses. Part of running a compliant business is to understand these requirements, and to be proactive in meeting them.

Ultimately, you must decide when to foreign qualify your business. As always, review the state’s requirements and your company’s plan for growth. When you’re ready to register, give us a call. We can take care of all your state filings for you, getting your business set up quickly.